How Thesis-Implied Pricing Works
When your causal tree computes a root probability of 42%, that means your model says contracts linked to this event should trade at 42 cents. If the market says 28 cents, you have 14 points of edge.
From Tree to Price
The thesis-implied price comes from the mathematical combination of node probabilities in your causal tree:
- Each leaf node has a probability you've estimated
- Branch nodes combine their children (using AND, OR, or weighted logic)
- The root node's probability is the thesis-implied price
Multiple Markets, One Thesis
A single thesis can imply prices across multiple contracts. A recession thesis might simultaneously imply:
- KXRECSSNBER-26 should be at 42 cents (vs. market 28)
- KXGDP-26Q2-TNEG should be at 30 cents (vs. market 18)
- KXUNRATE-26JUN-T5.0 should be at 40 cents (vs. market 35)
Each gap is a separate edge opportunity, all driven by the same underlying analysis.
Updating Implied Prices
When new information arrives and you update a causal node, the thesis-implied price automatically changes. If a strong jobs report drops unemployment expectations, node n1.1 probability decreases, which decreases the root probability, which decreases the thesis-implied price for recession contracts.
This cascade is automatic in SimpleFunctions — the agent updates the tree and immediately recomputes edge across all linked markets.